1. Field of the Invention
The present invention relates to techniques for identifying industry sectors and classifying particular companies into those sectors.
2. Description of the Related Art
For some time now, it has been common to group companies and their corresponding stocks into various business sectors. In theory, after having done so, the performance of any company can be compared against the performance of other companies in the same sector. These types of comparisons can have important implications in portfolio management and financial planning.
In addition, the sectoral statistics themselves can provide significant information regarding the macroeconomy and the prospects for other related and/or dependent industries. For example, a significant decline in profits in an agricultural sector may have a strong correlation with future sales of farm equipment.
Conventionally, each sector has been defined to include a particular type of business. Thus, in theory, each company can be assigned to the sector corresponding to its line of business. Unfortunately, many companies are diversified and therefore cross conventional sector boundaries. In addition, often times, companies that on the surface appear to be engaged in similar business are in fact affected by significantly different market forces. Still further, even the sector definitions themselves frequently fail to keep track of changing technology and changing business models, meaning for example that a high-growth evolving technology may be grouped with an older well-established technology.
In short, the conventional techniques typically have serious problems both with sector definitions and with assigning companies to particular sectors once those sectors have been defined. Each of these problems with conventional sector-based approaches can have the effect of significantly skewing the resulting sectoral statistics, substantially reducing the value of any comparison to such statistics.